Japan’s Nikkei was mostly flat while Australian shares fell 0.9 percent. Chinese shares opened in the red with the blue-chip CSI300 off 0.7 percent.

Liquidity was relatively thin due to holidays in South Korea and Hong Kong.

MSCI’s broadest index of Asia-Pacific shares outside Japan was just a shade higher at 568.4 points, but well below an all-time peak of 617.12 hit in January.

“We are seeing U.S. dollar strength and that is causing money to flow out from emerging markets to the U.S. There is some sort of risk aversion going on,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

“People are cautious about taking exposure in emerging markets.”

Those concerns offset the boost to sentiment from overnight gains on Wall Street over the apparent reconciliation between the United States and China over import duties.

Analysts said investors in the region were worried about the growth outlook, with the U.S. Federal Reserve staying on its policy tightening path.

“Stocks have rallied several times on the belief that trade tensions were easing, only to fall back down as investors took the opposite view,” said James McGlew, executive director of stockbroking at Perth-based Argonaut.

“While the global economy remains robust and first-quarter earnings have been strong, stock markets have mostly traded sideways this year because many investors have started to fear that the pace of the expansion has already peaked.”

The MSCI ex-Japan index is flat so far this year after a super-charged 33.5 percent gain in 2017.

JPMorgan’s Shigemi said investors will now turn their focus to the next Fed meeting on June 13 where it is widely expected to raise rates for a second time this year.

A total of three hikes is almost fully priced-in by the market for 2018 although some investors expect the Fed to be more aggressive.

It was the fear of higher inflation and thus faster Fed rate rises that caused a bond market rout earlier this year, sending yields sharply higher and triggering a share market sell-off.

The dollar hovered near five-month highs against a basket of currencies, boosted by the U.S.-China trade optimism.

The dollar index was last down 0.1 percent at 93.56 from Monday’s top of 94.058.

The euro held at $1.1782, within spitting distance of a more than six-month trough of $1.1715 touched on Monday amid continued political uncertainty in Italy.

Italy’s far-right League and the 5-Star Movement agreed on a candidate to lead their planned coalition government and to implement spending plans seen by some investors as threatening the sustainability of the country’s debt pile.

The Japanese yen steadied near four-month lows at 110.99 per dollar, while sterling eased slightly to $1.3428 ahead of key data that could determine whether the Bank of England raises rates in 2018.

Elsewhere, oil prices soared to their highest since 2014 after Venezuela’s presidential election heightened worries that the country’s oil output could fall further.

The market is also weighing the possibility of additional U.S. sanctions on the country.

U.S. crude added 24 to $72.48 per barrel and Brent rose 17 cents to $79.33.

The combination of higher oil and conciliatory actions on the US-China trade front boosted the Australian dollar, a liquid proxy for risk, to a one-month peak.

As the dollar strengthened, gold prices eased to stay near the lowest since late December at $1,290.5.